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Versabank (TSE:VBNK)
TSX:VBNK

Versabank (VBNK) AI Stock Analysis

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Versabank

(TSX:VBNK)

Rating:72Outperform
Price Target:
C$17.00
▲(7.05%Upside)
Versabank exhibits strong financial performance, with robust revenue growth and profitability. Technical analysis indicates potential bearish sentiment, while valuation appears reasonable. The earnings call highlights growth initiatives, despite some challenges. Overall, the stock demonstrates solid fundamentals with areas for improvement.
Positive Factors
Digital Banking Model
VersaBank’s digital banking model delivers scalable lending in a risk-mitigated structure.
U.S. Market Entry
EPS growth and rising ROCE benefit from U.S. market entry and continued strength originating RPP loans in Canada.
Negative Factors
Loan Growth
Loan growth of 9.1% Y/Y was the lowest since F1Q21, on weak Canadian fundamentals.
US RPP Rollout
US RPP rollout is moving slower than planned, with discussions with partners slowed by the complexity of the new program.

Versabank (VBNK) vs. iShares MSCI Canada ETF (EWC)

Versabank Business Overview & Revenue Model

Company DescriptionVersaBank, a schedule I chartered bank, provides various banking products and services in Canada. The company offers deposit products, such as guaranteed investment certificates, registered retirement savings plans, daily interest savings accounts, and tax-free savings accounts, as well as deposit insurance products. It also provides lending services, including point of sale financing that involves purchasing loan and lease receivables from finance companies operating in various industries; and commercial banking services comprising commercial real estate, public sector/infrastructure financing, condominium financing, and residential mortgages. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.
How the Company Makes MoneyVersabank generates revenue primarily through interest income from its lending activities, which include commercial loans, leases, and mortgages. The bank also earns non-interest income from fees associated with its deposit products and services. Additionally, Versabank leverages its digital platform to maintain lower operational costs compared to traditional banks, enhancing its profitability. Significant factors contributing to its earnings include strategic partnerships, particularly those enhancing its cybersecurity offerings through DRT Cyber Inc., and its ability to attract deposits at competitive rates through its digital banking model.

Versabank Earnings Call Summary

Earnings Call Date:Jun 04, 2025
(Q2-2025)
|
% Change Since: 0.35%|
Next Earnings Date:Sep 04, 2025
Earnings Call Sentiment Positive
The earnings call highlighted record credit assets and revenue growth, expansion in net interest margin, and strategic initiatives like the U.S. Receivable Purchase Program and structural realignment. However, challenges included high foreign exchange losses, increased expenses, and slower-than-expected U.S. market expansion. Despite these challenges, the strategic initiatives and growth in key areas contributed positively.
Q2-2025 Updates
Positive Updates
Record Credit Assets and Revenue
VersaBank achieved record credit assets and revenue in Q2 2025. Total assets grew 15% year-over-year to over $5 billion, and total consolidated revenue reached a record $30.1 million, up 6% year-over-year.
Expansion of Net Interest Margin
Net interest margin on credit assets increased by 23 basis points sequentially, with a 16 basis point or 10% higher sequential increase due to favorable trends and lower interest rate term deposits.
Growth in U.S. Receivable Purchase Program (RPP)
The U.S. RPP portfolio surpassed USD 70 million by the end of Q2, with expectations to reach at least USD 290 million by year-end.
Increase in Canadian Residential Construction Loan Portfolio
Growth was observed in the Canadian residential construction loan portfolio, driven by business-to-business mortgages and construction loans for residential properties.
Proposed Structural Realignment
VersaBank announced a structural realignment to align with U.S. bank frameworks, expected to reduce costs, mitigate risk, and increase shareholder value.
Negative Updates
High Unrealized Foreign Exchange Translation Loss
A significant unrealized noncash loss occurred due to the precipitous drop of the U.S. versus the Canadian dollar in Q2, impacting income.
Increased Net Interest Expenses
Consolidated net interest expenses rose to $17.5 million in Q2 2025 from $12.2 million in Q2 2024, driven by preliminary costs for structural realignment and foreign exchange translation losses.
Decline in DRT Cyber Revenue
DRT Cyber revenue decreased to $1.8 million from $2.3 million year-over-year, with a net loss of $652,000 due to higher operating expenses.
Challenges in U.S. Market Expansion
Onboarding new partners in the U.S. is taking longer than anticipated, affecting the expansion of the Receivable Purchase Program.
Company Guidance
During VersaBank's second-quarter fiscal 2025 conference call, several key metrics were highlighted. The bank achieved record credit assets and revenue, with total assets surpassing $5 billion, a 15% year-over-year growth. The net interest margin expanded by 23 basis points sequentially, driven by favorable trends. Earnings per share, excluding certain costs, were $0.28. The Canadian banking operations contributed $25.6 million in revenue, while U.S. operations increased by 22% sequentially. Credit assets grew to $4.52 billion, with the Receivable Purchase Program expanding 14% year-over-year. The CET1 ratio improved to 14.28%, and the bank's book value per share reached a record $16.25. Despite some dampening factors like foreign exchange losses, the strategic realignment towards a U.S. bank framework aims to enhance shareholder value and reduce costs.

Versabank Financial Statement Overview

Summary
Versabank exhibits strong financial health with commendable revenue growth, profitability, and cash flow generation. The balance sheet is robust, supporting long-term stability. However, attention is needed on managing liabilities growth and ensuring consistent operational and cash flow performance to maintain financial resilience.
Income Statement
82
Very Positive
Versabank has demonstrated strong revenue growth and profitability, with a significant increase in Total Revenue from prior periods. The TTM (Trailing-Twelve-Months) Gross Profit Margin is robust, and Net Profit Margin has also improved, indicating efficient cost management. However, the volatility in EBIT and EBITDA margins suggests potential fluctuations in operational efficiency.
Balance Sheet
78
Positive
The balance sheet shows a healthy equity buffer with a favorable Debt-to-Equity Ratio, indicating prudent leverage management. The Equity Ratio is stable, reflecting a solid asset base relative to liabilities. Return on Equity (ROE) has improved, showcasing effective use of shareholder funds. However, the potential risk lies in the increasing total liabilities, which may impact future financial flexibility.
Cash Flow
75
Positive
Operating Cash Flow is strong, supporting a healthy Free Cash Flow position. The Free Cash Flow to Net Income Ratio indicates efficient cash conversion from earnings. The Free Cash Flow Growth Rate has been positive, though the Operating Cash Flow to Net Income Ratio shows some volatility, suggesting potential challenges in consistent cash generation.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue110.59M111.63M108.03M82.39M65.36M54.19M
Gross Profit110.61M111.63M108.64M82.39M65.36M54.19M
EBITDA42.83M57.43M59.43M34.49M32.52M27.90M
Net Income35.19M39.75M42.16M22.66M22.38M19.41M
Balance Sheet
Total Assets4.97B4.84B4.20B3.27B2.42B1.94B
Cash, Cash Equivalents and Short-Term Investments546.19M226.21M132.24M88.58M271.52M257.64M
Total Debt109.68M108.58M110.62M109.42M100.39M16.72M
Total Liabilities4.45B4.44B3.82B2.92B2.08B1.69B
Stockholders Equity521.29M399.20M377.16M350.68M332.11M255.29M
Cash Flow
Free Cash Flow79.45M254.13M94.36M-33.23M-108.32M139.35M
Operating Cash Flow83.48M272.70M104.55M57.46M-108.31M139.59M
Investing Cash Flow-40.91M-157.58M-28.14M-141.61M-8.44M9.76M
Financing Cash Flow272.70M-23.33M823.25M-6.30M131.40M-30.85M

Versabank Technical Analysis

Technical Analysis Sentiment
Positive
Last Price15.88
Price Trends
50DMA
15.51
Positive
100DMA
15.53
Positive
200DMA
18.06
Negative
Market Momentum
MACD
0.12
Negative
RSI
57.05
Neutral
STOCH
83.84
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:VBNK, the sentiment is Positive. The current price of 15.88 is above the 20-day moving average (MA) of 15.36, above the 50-day MA of 15.51, and below the 200-day MA of 18.06, indicating a neutral trend. The MACD of 0.12 indicates Negative momentum. The RSI at 57.05 is Neutral, neither overbought nor oversold. The STOCH value of 83.84 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:VBNK.

Versabank Peers Comparison

Overall Rating
UnderperformOutperform
Sector (67)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
72
Outperform
$513.80M14.246.79%0.63%7.83%-37.41%
67
Neutral
¥718.51B10.847.44%3.36%7.82%15.26%
$1.00B10.625.38%6.10%
TSMKP
74
Outperform
C$765.04M10.5311.99%8.44%19.71%-15.59%
TSTF
73
Outperform
C$628.92M13.556.74%9.03%-8.68%-25.42%
TSAI
68
Neutral
C$530.36M10.709.47%8.33%-1.56%-9.70%
TSFC
67
Neutral
C$452.96M12.108.89%7.59%-4.56%0.77%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:VBNK
Versabank
15.88
1.39
9.59%
LRCDF
Laurentian Bank
22.87
4.96
27.69%
TSE:AI
Atrium Mortgage Invest
11.16
1.17
11.71%
TSE:FC
Firm Cap Mortgage Invest
12.33
2.15
21.12%
TSE:MKP
MCAN Mortgage
19.43
4.61
31.11%
TSE:TF
Timbercreek Financial
7.64
1.05
15.93%

Versabank Corporate Events

Business Operations and StrategyFinancial Disclosures
VersaBank Q1 2025 Results Highlight Strong Business Model and US Expansion
Positive
Mar 5, 2025

VersaBank reported its first quarter 2025 financial results, showcasing the strength of its business model as it expands its RPP solution in the US market. The bank saw a 48% increase in net income compared to the previous quarter, despite a 4% decrease in total revenue from the same period last year. Significant improvements were noted in key financial metrics, including a 33% rise in return on average common equity and a 31% increase in the leverage ratio, indicating robust financial health and strategic growth.

Dividends
VersaBank Announces Quarterly Dividend for Shareholders
Positive
Mar 5, 2025

VersaBank has declared a cash dividend of CAD $0.025 per common share for the quarter ending April 30, 2025. This announcement underscores the bank’s commitment to providing shareholder value and reflects its strong financial position, bolstered by its innovative business model and recent market expansions.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 19, 2025